A 150 Billion Fine to Tire Cartel

2016,
Indonesia,
Anticompetitive Agreeement

Jakarta, January 7, 2015 - Six tire manufacturers were proved to enter cartel and price fixing agreements in the production and marketing of tire in Indonesia. The six enterprises, PT Bridgestone Tire Indonesia, PT Sumi Rubber Indonesia, PT Gajah Tunggal Tbk, PT Goodyear Indonesia Tbk, PT Elang Perdana Tyre Industry and PT Industri Karet Deli, were individually imposed with administrative fine of IDR 25 billion, a highest fine that can be imposed by the competition law. This decision was announced yesterday evening (Jan 7) in KPPU head office in Jakarta.

KPPU Commissioner Council led by Kamser Lumbanradja stated in the decision that their conclusions were made on the evidence from minutes of presidential meeting of the Association of Indonesian Tire Producer (APBI) conducted from 2009 to 2012. The minutes found to discuss about their agreements to uphold their production and maintain the prices. Furthermore, in the Sales Director Meeting of APBI on December 2008, which the result should be submitted to the presidential meeting on 21 January 2009, they were clearly highlighted that “APBI members must not enter to a price war practice”. This statement once declared by the Chair of APBI and undisputedly agreed by all members.

Meanwhile, in the presidential meeting of 26 January 2010 at the Hotel Nikko (one of the five stars hotel in Jakarta business district), they also highlighted that “to all members of APBI, once again, to uphold their self and continue to control their distribution and maintain a conducive market condition according to their demand”. At the following presidential meeting in 25 February 2010 at the same hotel, they announced the minutes of Sales Director meeting contained agreed prevention mechanism by each enterprises to guard their market stability. On 10 Aril 2010, at the similar meeting, they declared that “market monitoring by APBI will be reactivated from May 2010, and all members must control their tire distribution to sustain this condition”.

In addition to the evidences, KPPU also used the Harrington Model to measure the existence of cartel agreement. This model is the combination of methods in foreseeing cartel in many perspectives. It uses the error correlation analysis or residual regression using panel data between companies. In the econometric analysis, error or residual regression often uses as the basis for cartel behavior. Experts use this model to analyze behavioral pattern in the dedicated time frame and between samples. Harrington Model deems to be a valid method to prove the existence of cartel, said Kamser in his explanation.

Following the decision, KPPU will also recommend the Minister of Industry to advice APBI to have them comply with the fair competition principles rules by the Law No. 5/1999.